While the nation’s Class A apartment stock has generally underperformed throughout the past year, there are a handful of markets where the bump in prices between luxury leases is solid. Out of the nation’s largest 50 apartment markets, 10 are recording notably strong Class A new lease trade-out – a measure of rents in signed leases compared to the previous lease for the same unit – ranking beyond that of Class B and C stock. Many of these markets with strong-performing Class A product are areas in which overall construction levels have been modest for much of the past decade. In fact, Sacramento and Detroit – where new lease trade-out in Class A units is 16.4% and 13.7%, respectively – rank among the bottom five markets for inventory growth during that period. In the only exceptions, West Palm Beach, Greensboro/Winston-Salem and San Antonio rank in the top half of the nation’s inventory growth markets over the past decade. In those markets, despite big construction numbers, luxury trade-out for new leases is between roughly 7% and 15%. Markets where Class A new lease trade-out towers over the performance in Class B units are Sacramento, West Palm Beach and Miami, where the class A performance is at least 200 basis points stronger.
